BOK ON LEGOLAND FINANCING

[Anchor Lead]

Gangwon-do Province has decided to repay the Legoland debt a month earlier than scheduled, apparently because of the rising criticism over the turmoil in the capital market. But uncertainty remains. The Bank of Korea has decided to step in to provide funding to securities companies.

[Pkg]

The Dunchon apartment reconstruction project has averted a serious crisis. The builders had to secure funding on their own to resume construction, but the bonds were finally re-issued just a day before the deadline.

[Soundbite] (Construction company staff (VOICE MODIFIED)) : "The reissuance of bonds will have a positive effect. We can invest cash in something else as long as you have it."

Although the worst-case scenario has been averted, concerns over real estate loans remain. It is because regional small and medium-sized businesses have difficulties issuing relevant bonds despite high interest rates. First of all, it will provide six trillion won to securities companies, considered the epicenter of this crisis due to their large share of real estate loans. Their bonds will be purchased, but three months later they will have to buy them back. This is similar to providing them with a three-month loan. Commercial banks will be allowed to use bank debentures with high credit ratings and the bonds of nine public agencies like KEPCO as collateral when borrowing money from the BOK. The central bank believes this will pave the way for cash to flow in the corporate bond market, even with the help of bonds with low credit ratings.

[Soundbite] Hwang Sei-woon(Korea Capital Market Inst.) : "We can expect better market liquidity, as banks can borrow cash from the Bank Of Korea using their bonds as collateral."

In the next six months, financial authorities will raise the ratio of loanable funds to bank deposits with hopes to increase loans provided to households and businesses.